Stock Market Basics – Want To Invest But You Are In Debt

December 23rd, 2011 | Posted in Credit Card Debt

Most financial professionals advise individuals to cut down their debt before they can begin to think about investing in any form of investments. I agree with this idea to a certain degree, however, I really feel you ought to use a combination method. After all even though specialists tell you to cut down your debt before you invest, these very same professionals will advise you to pay your self first. Paying your self usually refers to once you get paid you put a portion of your income aside for you before you pay bills.

If you want to eliminate the amount of debt that you are carrying, then there are a couple of ways to do this. If you are in serious debt, then the task will not be easy at first but over time you will see positive results. Here are a couple of strategies that you could implement starting today. Keep in mind that it is important that you have a goal, a plan, and the discipline to follow through.

Firstly, you should implement a cash only policy. When you can’t pay for it using money, then you shouldn’t purchase it. By implementing this strategy and sticking to it you will find yourself beginning to scrutinize your purchases. It is sad, but when we have credit cards at our disposal we have a tendency to become out of school with our spending. As result, we rack up ridiculous amounts of debt.

Moreover, you should make an effort to reduce the balances of your high interest credit cards first. Financial experts and credit counselors refer to this as debt stacking. One thing that I do not advise is canceling your credit cards as this would effect your credit score negatively. More often than not, people who are in over their heads in debt, will start mindlessly canceling their credit cards. Do not make this mistake. Simply pay down your balances, especially on high interest cards, and your credit score will begin to improve because the amount of debt you are using has significantly decreased.

After college I was going through a financial hardship and made the mistake of ignoring my creditors. Of course this turned out to be a very dumb decision on my part. As a result of this, my credit score suffered terribly mainly because I didn’t speak to my creditors. If you are going through some type of hardship then it is best to be proactive and call your creditors to make them aware of your situation. Many creditors will work out special arrangements for you. You would be surprised at the type of arrangements that can be worked out with creditors if you are upfront with them.

At last, formulate a program and come up with a financial budget. List all of your expenses which would incorporate debt payments like credit cards, car note, bank loans, and home mortgage. Conversely, you need to list all your earnings sources. Once you have a list your source of income and expenses, you will have a clear view of your financial standing. Then you have to figure out ways that you can improve your income and lower your expenditures. From all of the information that you have compiled you will be able to create a doable financial budget.

After you have paid down your debts then you should look into putting some of that added cash into investments. I prefer investing in stock due to the ability to generate high returns on my money. I must warn you that investing in stock does come higher risks. There are other less risky investments that you can look at like mutual funds or money market accounts.

Be ready to go once you have paid off your debt and start to learn stock market basics.